This $3 Stock Could Rocket 25% Higher in Less Than 2 Weeks

This $3 Stock Could Rocket 25% Higher in Less Than 2 Weeks Michael J. Carr & Amber Hestla-Barnhart February 16, 2013   Print | PDF It's common to see large price moves after an earnings announcement. Analysts often spend a great deal of time studying a company and developing estimates for revenue and earnings. When a company misses or exceeds those estimates, analysts are forced to evaluate their assumptions. This is all done very quickly and sometimes results in large price swings for a stock. News isn't limited to earnings. Companies can also introduce new products, or in the case of biotech companies, release results from drug studies or Food and Drug Administration (FDA) decisions. Both of these events can be significant to a small-cap biotech and lead to big swings in the stock. Drug studies can hold surprises, but we suspect that only the most promising drugs are publicized by most companies. That might make bad news even worse, and when a company delivers a negative report, the selling can be fast and sometimes overdone. That is what we think happened in the case of Dynavax Technologies (NASDAQ: DVAX). Also In Today's Issue How to Safely Increase Income in Retirement Former United States Military Intelligence Analyst uses weird "glitch" in the options market to safely capture income on demand. And now she's showing others how to use this "glitch" too. If you're interested in more income, more often, click here. Triple the Power of Ordinary Dividend Strategies... Former IBM engineer and accomplished poker player from Austin, Texas, has perfected a unique, multi-layer dividend strategy. If you need, or want more income, then you really should consider checking this out. Click here for the full story... Dynavax Technologies is a small-cap biopharmaceutical company that is hard at work seeking FDA approval for a drug that it developed. Dynavax is testing Heplisav, a potential vaccine for hepatitis B. The company believes that it works faster than existing vaccines and patients will only need two doses compared with three for the currently licensed vaccines. In November, the company delivered some good news and some bad news. The FDA committee studying Heplisav said that the drug was effective. That vote was a landslide with 13 of the committee members agreeing and only one dissenting. The bad news was in the next sentence of the company's press release: "Additionally, the Committee voted eight to five with one abstention that there was insufficient data to adequately support the safety of HEPLISAV." Traders reacted quickly and the stock price fell 47% on the news, plummeting from $4.63 to $2.44. The stock is currently trading around $3.15, and more news is only days away. On Feb. 24, DVAX should receive word from the FDA about additional data the company has provided about the safety of the drug. This is definitely a speculative trade, but good news should move the stock significantly higher. We think that if the drug had been approved in November, the stock would have rallied from $4.63. If DVAX receives good news later this month, we think it could see that price again. In an investor presentation, the company does seem to be anticipating approval of Heplisav. Their data indicate that the drug's safety is at least comparable to the existing vaccines. The company also told analysts they expect to begin a commercial launch of the vaccine in the second quarter of this year. With the stock at $3.15, reaching the price seen in November would deliver a gain of about 47% to traders. A more conservative, short-term price target of $3.95, a potential gain of about 25%, is based on the triangle pattern formed since the stock bottomed. Momentum, shown as the Moving Average Convergence/Divergence (MACD) indicator in the chart below, is also bullish, adding support to a buy recommendation. This small-cap stock could be a great long-term holding. The company believes that the annual market in the United States for hepatitis vaccines could reach $750 million a year with the global market reaching almost $1.9 billion a year. If the company is correct, it could be the leading supplier in a market worth more than $2 billion a year one day. Traders can also consider using call options to benefit from any bounce that the Heplisav news could generate. March call options with a $2.50 strike price are trading at about $1. Using in-the-money options is a way to increase leverage in a trade. The cost basis on DVAX would be $3.50, an 11% premium to the current price. If DVAX reaches $3.95 the options would be worth at least $1.45 for a potential gain of 45%, while buying the shares offers a potential gain of 25% if that target is achieved. If DVAX receives bad news from the FDA, expect a fall that could quickly set new lows below $2.20. If buying the stock, use a stop-loss of $2.80 to limit the risk as much as possible. On the call option, a stop-loss of $0.50 should be set. Either way, if DVAX falls the day Heplisav news is announced, exit your position. This trade is a potential winner if DVAX receives good news from the FDA. The company seems to believe it will, and the chart indicates many traders agree. Recommended Trade Setup: Stock Trade Options Trade Buy DVAX at the market price Buy DVAX March 2.50 Calls at $1.10 or less Set stop-loss at $2.80* Set stop-loss at $0.50* Set initial price target at $3.95 Set initial price target at $1.45 Potential Profit: 25% Potential Profit: 32% *If DVAX falls the day Heplisav news is announced (scheduled for Feb. 24), exit the position. Good Trading, Michael J. Carr & Amber Hestla-Barnhart Editor's note: Amber Hestla-Barnhart is a former Military Intelligence Analyst with an eye for seeing what others miss. She now applies her unique training to the options world where she's uncovered a glitch that could be worth thousands of dollars per year to traders. To see her report, and what she's uncovered, click here. Dr. Melvin Pasternak's Trades & Updates Company (symbol) Trade Type Buy/Sell Date Buy/Sell Price Stop-Loss Current Price Total Return SPDR High Yield Bond ETF (NYSE: JNK) Long 01/30/12 $39.94 $34.98 $40.66 +1.8% Michael Kors (NYSE: KORS) Long 10/08/12 $53.33 $57.31 $63.27 +18.6% Costco (NASDAQ: COST) Long 12/03/12 $104.82 $93.56 $102.79 -2.5% Dendreon (NASDAQ: DNDN) Long 1/28/13 $6.31 $5.68 $6.07 -3.8% View all closed trades here. Stock prices in this issue are as of the close of trading on February 15. SPDR Barclays Capital High Yield Bond ETF (NYSE: JNK) rose throughout the week before giving back a little on Friday. The fund is currently sitting above resistance marked by the rising 50-day moving average. Daily RSI has just crossed above the key 50 juncture. Daily MACD appears on the verge of giving a significant "buy" signal. Daily stochastics recently gave a "buy" signal as well. I'm currently ahead about 2% on the trade. My stop-loss of $34.98 and target of $48.01 hold. Michael Kors (NYSE: KORS) gapped up Tuesday, hitting a new all-time high, and approaching my target of $64.98. The stock jumped following blowout fiscal third-quarter results. Due to strong holiday demand, same-store sales surged 41% in North America and 58% in Europe, from the year-earlier period. Revenue rocketed up 70% to $636.8 million, compared with the same quarter last year. Earnings shot up 129% to $0.64 per share from the year-ago period. Shares retreated during the week as trader enthusiasm cooled. However, the stock is currently testing resistance at the upper Bollinger Band. Daily RSI is at the overbought 70 level, but flat. Daily MACD is on a "buy" signal. I'm currently up nearly 19% on the trade. To protect this profit, I'm raising my stop-loss to $57.31. My target of $64.98 holds. Costco (NASDAQ: COST) slid slightly over the week, possibly on news that high-end jeweler Tiffany & Co (NYSE: TIF) is suing the big-box retailer. Shares are currently resting just below resistance at the middle Bollinger Band. Daily RSI is holding above the key 50 juncture. My stop-loss of $93.56 and target of $114.69 remain. Dendreon (NASDAQ: DNDN)  slipped following news that investment firm Maxim Group downgraded the stock to "sell." The biotech company just presented results on studies of its flagship drug, Provenge, at the American Society of Clinical Oncology Genitourinary Cancers Symposium, which ended today. The stock is currently testing support marked by the middle Bollinger Band. Daily RSI is holding just above the key 50 juncture. The biotech firm will release fourth-quarter and full-year 2012 results at market open on Feb. 25. So far, I'm down about 4% on the trade. My stop-loss of $5.68 and target of $11.91 hold. To read my most recent article, Chart Pattern Predicts This Stock Could Rise 45% by Year-End, visit ProfitableTrading.com. -- Dr. Melvin Pasternak Co-Editor, Trade of the Week   Chart Forecasting This Stock Could Plummet as Much as 60% Technicals Signaling This Undervalued Stock is a 'Buy' 2 Stocks That Could Soar Up to 15% in the Next 12 Weeks         Disclosure: None. You are receiving this newsletter because you visited us at ProfitableTrading.com and registered to receive our free trading service -- Trade of the Week. If you feel you have received this issue in error, please contact us by visiting our web site. We sincerely hope that you benefit from your subscription to this free newsletter, and we're willing to do whatever it takes to keep you as a satisfied customer. You may contact our customer service department by visiting this link or writing us at ProfitableTrading.com, LLC, 839-K Quince Orchard Blvd., Gaithersburg, MD 20878. 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